Going Down

New Zealand has been slipping by comparison to other OECD countries for at least 30 years, and the rate appears to have accelerated in the last 10 or so. Our country's income is declining relative to others.

Is this within our control or not? Some (generally apologists for failed policies) would say that NZ's decline is inevitable and unstoppable - a result of our being too small and too far away- and that earlier relative prosperity was just an historical accident. Consideration of the rise of places like Singapore, and Israel- smaller, lacking resources, sited in dangerous and politically unstable areas -belies this. Both were much poorer than NZ just a generation ago and now have GDP per capita of twice and more ours.

Accepting that we must therefore have stuffed up somewhere, the proximate causes are obvious- an increasingly anti-business, anti-development atmosphere, redistributionist policies that discourage enterprise, and declining productivity in public sectors (esp. health, education and energy). Rather than building wealth by owning businesses, rising generations (correctly, in terms of their self interest) prefer paid employment, especially in insulated and well remunerated state jobs. They are right- business isn't good to be in- it's widely disparaged and distrusted- and beset by employee biased labour laws, OSH, the RMA and a predatory IRD. Those with aspirations sensibly take their talents offshore- we're exporting our best, leaving newly arriving immigrants and those at the bottom of the heap who have few other opportunities for advancement as the only major business starting groups.

So Labour and nine years of its nanny state, anti-enterprise, re-distributionist policies are to blame then?
Not really. Labour was more a symptom of NZ's problems than a cause. They were just a typical group of opportunistic power seekers- delusional, as such usually are, in the sense of believing that they "were doing it to make things better for us". Plainly they didn't (using prosperity as the measure), as trends clearly show, and as will become increasingly obvious in the next few years. But if it hadn't been them it would have been some other group that could easily have been even worse for NZ. At least under Labour, our press and judiciary remained relatively robust as did fiscal policy, although the external current account deficit continued to grow year by year and money we should have banked during the boom years was effectively squandered.

The question is; why do NZers seem to be uncaring, even unaware, of the self harm they have been doing by embracing the types of policies that Labour could win their votes by promoting.
Unfortunately it's true that populations don't always make sensible decisions. Two examples: Germany, where National Socialism was broadly embraced in the '30s, destroying fair chunks of the world within just 10 years, and leaving Germany with an enduring burden of shame. And, the often widespread popular support accorded left wing revolutions that rapidly impoverish their countries and cause unaccountable suffering.
Self-destruction is not uncommon- it might almost be the default setting for nations, and there is certainly no guarantee that once a nation attains relative prosperity it can't lose it.

But this should happen only to other countries, not to NZ!- and NZ in 2009 is not Germany in 1933 or Russia in 1917, that's for sure, nor, though we've also turned on our farmers, are we likely to mirror Zimbabwe's rapid collapse. But maybe we are tracking Argentina in the '30's- when they dropped from being world class affluent to basket case. Most worryingly, 75 years later, Argentineans collectively still don't seem to have understood the cause of their fall, with populist leader Christina Kirchner recently imposing an export tax on agricultural products, (their main tradeables sector), just to close off any chance they might have had to climb back up.

If NZ is to halt the present trend, then we will either have to benefit from some happenchance event- or we will need to understand the causes of the cultural drift that has shifted us into a self destructive phase and attempt to reverse it.

Why have NZers, who just a generation ago believed in enterprise and meritocracy, and growth, and a more prosperous future, become anti-enterprise nimby's with declining relative productivity, more interest in redistribution than in creating wealth, and hostility to those who still try to- and who elect governments reflecting these changes of values?

Could it be that falling productivity (in relative terms) and anti-enterprise trends are being driven by un-intended consequences of our recent drive towards multiculturalism? A Nation's cultural homogeneity is generally a correlate of its prosperity and stability- and the relationship is probably causative. It's the 'tragedy of the commons' writ large; no section of a population will delay reward (a seemingly necessary precondition for rising prosperity) if they believe that some other section of that population will capture the rewards instead. 'Beggar thy neighbour' prevails. Additionally, in the absence of a pervasive national value set, crime proliferates, laws have to be more detailed, and their enforcement becomes much more expensive- all of which drain productivity.

There could be something in this- but countries like Malaysia and the USA are at least as multicultural as NZ and are successful (Malaysia increasingly so).

Or perhaps our unwillingness to do what's necessary to lift ourselves back up is explainable by the spoilt child effect- that as a nation we're behaving like the privileged children of rich parents- self indulgent, self centred, seemingly unaware and uncaring as to where the money comes from. If this analogy holds, as the money runs out, elites will move towards rent seeking activities. Those who can do so will use their current power and influence to insulate themselves, their families and their social groupings from relative decline. From this, the trend would be towards a less meritocratic, less socially mobile society with increasing disparities in income and wealth- some signs of which are apparent now in NZ.

However, though self-indulgent behaviour and deleterious consequences of multiculturalism may be having some effect, it seems to me that the main cause of our failure as a nation to improve our place in the world, or even to hold on to where we are, is more fundamental.

Could it be that it arises from a developing cultural rift: Growing conflict between the essentially urban identity of NZ and the tiny rural sector from which we derive our relative wealth by way of the tradeables (exports) they generate. The growing antagonistic disconnect between the values of our overwhelmingly urban majority and the source of their relative wealth (primary production) has clearly become destructive- with daily and largely unchallenged disparagement of 'dirty dairying' and farming culture in general- and increasingly restrictive and costly anti-farming/anti-business laws. At a motivational level, constant criticisms and the hostile regulatory environment are draining drive and confidence from even our most determined farm operators. They find the expressed comments of their city cousins to be completely at odds with how they see themselves and the world, and respond rather like German Jews did in the 30's- keep their heads down and continue to hope that 'the country's gone crazy just now, but this will pass'.

But will it?

The National party victory in our recent election may not help. Even if it's leadership have the desire to change NZ in the required direction, and they seem to have, the required policy changes cannot work without broad public support- which isn't available.

For NZ to benefit sufficiently from our special farming skills and benevolent growing environment to reverse the current downward trend in our relative prosperity, there will need to be a reversal in the broad and deep attitudinal changes that urban NZers have undergone in the last 30 years or so. They will need to once again become supportive of enterprise in general and primary production in particular. But the urban sector's drift away from the founding values of colonial NZ -from which our prosperity to date has derived (like it or not)- seems to have an almost religious element to it that will likely therefore defy logic and be almost impossible to reverse in any period less than a few generations.

Perhaps we can find another way around this then?

A change to some other source of tradeables would do it- some activity that the urban majority can participate in and relate to- then it wouldn't matter that we've become abusive of our wealth generating primary sector. A five times growth in tourism for example- but this doesn't seem realistic during times of decreasing discretionary spending in most of the rich world and increasing angst about air travel- especially air travel to somewhere as distant as NZ.
Unfortunately the only other realistic prospects for replacing agricultural products as our main tradeables are resource based- and it doesn't seem likely that our disconnected urban population will be any more accepting of coal or mineral extraction than they are currently of farming- probably even less so.